Johns-Manville Corporation Et. Al.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK 	FOR PUBLICATION
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In re: 	Chapter 11
JOHNS-MANVILLE CORPORATION, et al., 	Case Nos. 82 B 11656,
82 B 11657, 82 B 11660,
82 B 11661, 82 B 11665 through
82 B 11673 inclusive,
82 B 11675, 82 B 11676 (BRL)
Debtors.
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APPEARANCES:
MILBERG LLP
One Pennsylvania Plaza, 48 th Floor
New York, NY 10119
Telephone: (212) 594-5300
Facsimile: (212) 868-1229
By: 	Matthew Gluck
Kent A. Bronson
Statutory Settlement Counsel and Hawaii Settlement Counsel
GOLDBERG KOHN LTD
55 East Monroe Street, Suite 3300
Chicago, Illinois 60603
Telephone: (312) 201-4000
Facsimile: (312) 332-2196
By: 	Ronald Barliant (admitted pro hac vice)
Danielle Wildern Juhle (admitted pro hac vice)
Common Law Settlement Counsel
SIMPSON THACHER & BARTLETT LLP
425 Lexington Avenue
New York, NY 10017
Telephone: (212) 455-2000
Facsimile: 	(212) 455-2502
By: 	Barry R. Ostrager
Myer O. Sigal, Jr.
Andrew T. Frankel
Attorneys for Respondents The Travelers Indemnity Company and Travelers Casualty and Surety
Company
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Before: Hon. Burton R. Lifland
United States Bankruptcy Judge
MEMORANDUM DECISION AND ORDER GRANTING THE MOTIONS OF HAWAII
AND STATUTORY DIRECT ACTION SETTLEMENT COUNSEL AND COMMON
LAW SETTLEMENT COUNSEL TO COMPEL TRAVELERS’ PAYMENT OF
SETTLEMENT PROCEEDS
Before the Court are the motions (the “Motions”) of (1) Statutory and Hawaii Direct
Action Settlement Counsel to Compel Payment of Settlement Proceeds Under Statutory and
Hawaii Direct Action Settlement Agreements (the “Statutory/Hawaii Motion”) (Dkt. No. 3931)
and (2) Common Law Settlement Counsel to Enforce Settlement Agreement and Compel
Payment of Settlement Proceeds Under Common Law Settlement Agreement (the “Common
Law Motion”) (Dkt. No. 3932). 1
Despite attempts to portray the issues before this Court on remand as multifaceted and
complex, they are not. 	The only impediment to effectuating these landmark settlements is the
resolution of a single disputed condition precedent. Therefore, in accordance with the directive
from the Second Circuit and hopefully to end this Sisyphean2 cycle, the Court will resolve this
narrow dispute that has gone on for too long, especially for those asbestos victims who have yet
to be fully compensated. See In re Johns-Manville Corp. (“Manville III”), 600 F.3d 135, 159 (2d
1 Although the Motions were brought separately by Statutory and Hawaii Settlement Counsel and Common Law
Settlement Counsel, the settlements have consistently been construed and recognized as interconnected. They are
not mutually exclusive expressions of prohibitions against statutory claims by one party and against common law
claims by another. See Transcript of Aug. 17, 2004 Hearing (Dkt. No. 3819) at p. 20: 15-16 (This Court found that
“[the Hawaii and the Statutory Settlements on the one hand and the Common Law Settlements on the other hand]
both rest on the same foundation.”). Indeed, Governor Cuomo noted that “[f]rom the beginning of the mediation”
process, he “personally believed that the large number of direct actions . . . were basically interconnected” and that
“the connectedness of these actions . . . require[d] that in order to achieve the best possible result, everything be
done completely at the same time.” Transcript of May 24, 2004 Hearing at p. 6: 2-6; p. 11: 2-5, Ex. B to Declaration
of Barry R. Ostrager (“Ostrager Decl.”) (Dkt. No. 3937).
2 Sisyphus was the son of Aeolus, ruler of Corinth who was punished “by being compelled to roll a stone to the top
of a slope, the stone always escaping him near the top and rolling down again.” Thus, a Sisyphean cycle refers to
one that is “endless and unavailing.” See Random House Dictionary of the English Language 1333 (1970).
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Cir. 2010) (leaving “it to the parties, with the aid of the bankruptcy court, to determine the status
of their settlements”).
Nearly three decades ago, the Johns-Manville Corporation and its affiliated companies
(collectively, “Manville”) filed the instant chapter 11 cases before this Court. The same parties
that were present thirty years ago are again before this Court in this long-standing saga. 	In
addition, as the Supreme Court noted, “[a]lmost a quarter-century after the 1986 Orders were
entered,” “the same judge who had issued the 1986 Orders” is still presiding today. 	Travelers
Indem. Co. v. Bailey, 129 S. Ct. 2195, 2206, 2200 (2009). 	But most importantly, the relief
sought by the parties is still the same – compensation for the thousands of asbestos victims who
continue to await their agreed-upon settlement payments.
More than six years ago, Settlement Counsel3 and Travelers4 (collectively, the “Parties”)
executed three settlement agreements to resolve actions brought by victims against Travelers for
asbestos-related personal injuries arising from Travelers’ relationship with Manville. 	At that
time, Travelers represented to this Court that “[t]hese settlements will collectively provide nearly
a half billion dollars to asbestos claimants at a time when new sources of asbestos compensation
are few and far between.” Supplemental Declaration of Kent A. Bronson (Dkt. No. 3945), Ex. 2
at p. 1 (emphasis in original). 	Indeed, Travelers agreed to pay at least $360 million to the
statutory direct action settlement fund, $15 million to the Hawaii direct action settlement fund
and $70 million to the common law direct action settlement fund upon the satisfaction of
specified conditions precedent.
3 “Settlement Counsel” refers collectively to the Statutory Direct Action, Hawaii Direct Action, and Common Law
Direct Action Settlement Counsel as defined in the respective settlement agreements. See Declaration of Kent A.
Bronson (“Bronson Decl.”) (Dkt. No. 3931), Ex. 1, ¶ 1(s); Ex. 2, ¶ 1(i); Ex. 3, ¶ 1(r).
4 “Travelers” as used herein is defined in the respective settlement agreements. See Bronson Decl., Ex. 1, ¶ 1(u);
Ex. 2, ¶ 1(u); Ex. 3, ¶ 1(s).
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At the core of the instant Motions lies a sharp dispute between the Parties as to whether,
pursuant to the terms of these settlements, Travelers’ payment obligations were irreversibly
triggered by the Supreme Court’s decision in Bailey or terminated by the Second Circuit’s
decision in Manville III.
For the reasons set forth below and at oral argument, the Motions are GRANTED.
Travelers is, therefore, ordered to immediately fulfill its payment obligations in accordance with
the plain terms of the settlements.
BACKGROUND
This Court assumes familiarity with the lengthy procedural history of these cases and,
accordingly, will address only those facts necessary for resolution of the Motions at issue.
I. 	Facts
A. The Direct Actions
On December 18, 1986, this Court entered an order (the “Insurance Settlement Order”)5
prohibiting “all Persons” from “commencing and/or continuing any suit, arbitration or other
proceeding of any type or nature” against Travelers that sought to collect “any and all claims . . .
against [Travelers] based upon, arising out of or relating to” the insurance policies under which
Travelers was contractually obligated to defend Manville against asbestos-related torts. In 2002,
Travelers invoked the terms of this 1986 Order, when it moved this Court to enjoin twenty-six
state court actions (the “Direct Actions”) seeking to hold Travelers liable for alleged asbestos-
related personal injuries arising from (1) Travelers’ underwriting of insurance policies for
Manville; (2) Travelers’ investigation, defense and settlement of claims against Manville; and (3)
5 The Insurance Settlement Order was incorporated by reference in this Court’s December 22, 1986 order
confirming Manville’s plan of reorganization (the “Confirmation Order”, and together with the Insurance Settlement
Order, the “1986 Orders”).
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the knowledge that Travelers gained in the course of its nearly three-decades-long insurance
relationship with Manville.
While certain of the Direct Actions were based on state consumer statutes (the “Statutory
Direct Actions”) and others on common law theories (the “Common Law Direct Actions”), all
were predicated on the same underlying conduct: that Travelers acquired knowledge about the
dangers of asbestos from claims in the 1950s, recognized the potential for future escalation of
asbestos litigation and began to influence Manville’s purported failure to disclose knowledge
about asbestos hazards.
In 2002, for cause shown, this Court issued a temporary restraining order prohibiting
further prosecution of the Direct Actions. Following a hearing, this Court referred the Parties to
mediation and, on August 1, 2002, appointed the Honorable Mario M. Cuomo, former Governor
of New York, to serve as mediator (the “Mediator”).
Over the next several months, under the auspices of the Mediator, the Parties executed
settlement agreements resolving claims brought in the Statutory Direct Actions (the “Statutory
Direct Action Settlement”), the Common Law Direct Actions (the “Common Law Direct Action
Settlement”), 	and 	the 	Hawaii 	Direct 	Actions6 (the 	“Hawaii 	Direct 	Action 	Settlement”)
(collectively, the “Settlements” or the “Settlement Agreements”).
B. The Settlements
The mechanics of each of the Settlements are the same: Travelers will make the agreed-
upon settlement payments into a fund created to pay Direct Action claims brought by eligible
asbestos personal injury and wrongful death claimants. 	Travelers will make an additional
payment to cover the costs, subject to specified caps, associated with the formation and
6 The Hawaii Direct Actions are predicated on Hawaii consumer statutes, and are a subset of the Statutory Direct
Actions.
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administration of each fund. 	To gain access to the appropriate fund, a Direct Action claimant
must sign and deliver to Travelers a general release (the “General Release”), attached as Exhibit
B to each of the Settlements, stating that Travelers is released from further liability “separate and
apart from Travelers’ protection under the 1986 Orders.” Bailey, 129 S. Ct. at 2200.
Pursuant to the Settlements, Travelers’ payment obligations are contingent upon the
satisfaction of three conditions precedent. 	These conditions, stated in general terms, are as
follows: (a) entry of an order by this Court that becomes a “Final Order”7 clarifying that the
Direct Actions were, and had always been, barred by this Court’s injunction contained in the
1986 Orders (the “Disputed Condition Precedent”); (b) entry of an order, that becomes a “Final
Order” approving the proposed Settlements; and (c) the execution and delivery into escrow of a
specified number of General Releases, within sixty days of entry of this Court’s order approving
the Settlements. 	None of the Parties disputes that conditions (b) and (c) have been satisfied.
Indeed, over a hundred thousand General Releases have been delivered and escrowed. 	See
Common Law Motion at p. 5; Bronson Decl., Ex. 4.
In late spring of 2004, the Parties filed separate motions seeking this Court’s approval of
the Settlements. 	Thirteen objections were filed, either by insurance companies or various
asbestos claimants separately referred to as the Asbestos Personal Injury Plaintiffs and the
Cascino 	Asbestos 	Claimants 8 (collectively, 	with 	the 	objecting 	insurance 	companies, 	the
“Objecting Plaintiffs”).
7 The Settlements define “Final Order” as “an order as to which the time to appeal, petition for certiorari, motion for
reargument or rehearing has expired and as to which no appeal, petition for certiorari or other proceeding for
reargument or rehearing shall be pending or as to which any right to appeal, petition for certiorari or motion for
reargument or rehearing shall have been waived in writing by the Entity possessing such right or in the event of an
appeal, writ of certiorari or motion for reargument or rehearing has been sought, such order shall have been affirmed
by the highest court to which such order was appealed or certiorari has been denied and the time to take any further
appeal or petition for certiorari shall have expired.” Bronson Decl., Ex 1, 1(j); Ex. 2, 1(g); Ex. 3, 1(j).
8 The parties comprising the Asbestos Personal Injury Plaintiffs and the Cascino Asbestos Claimants were discussed
by the Second Circuit in In re Johns-Manville Corp., 517 F.3d 52, 55 nn.1-2 (2d Cir. 2008).
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One of the objectors was Chubb Indemnity Insurance Company (“Chubb”), a co-
defendant with Travelers in certain Common Law Direct Actions, who stood to be enjoined from
bringing potential contribution and indemnity claims against Travelers. To preserve its ability to
bring such claims against Travelers, Chubb joined the Objecting Plaintiffs in arguing that this
Court lacked subject matter jurisdiction to enjoin non-derivative claims against Travelers, a third
party non-debtor in Manville’s bankruptcy proceedings. Chubb additionally (and independently)
objected on due process grounds, contending that this Court lacked authority to enjoin it because
despite being a major informed institutional insurer that engaged in the mammoth asbestos
litigation, Chubb did not receive sufficiently adequate constitutional notice of the 1986 Orders.
C. 	The 2004 Clarifying Order
Following a full and contested evidentiary hearing on July 6, 2004, and upon a thorough
review of the entire record, this Court granted the Parties’ motions by entering a single order
approving all three Settlements, and clarifying that the 1986 Orders barred pending Direct
Actions and “[t]he commencement or prosecution of all actions and proceedings against
Travelers that directly or indirectly are based upon, arise out of or relate to Travelers[’] insurance
relationship with Manville or Travelers[’] knowledge or alleged knowledge concerning the
hazards of asbestos,” including claims for contribution or indemnification. 	Order Approving
Settlement 	of 	the 	Statutory, 	Hawaii 	and 	Common 	Law 	Direct 	Actions 	and 	Clarifying
Confirmation Order, Including Insurance Settlement Order and Channeling Injunction, dated
Aug. 17, 2004, at ¶ 7 (Dkt. No. 3751) [hereinafter, the “2004 Clarifying Order”].
That same day, this Court separately issued findings of fact and conclusions of law
detailing the basis for the 2004 Clarifying Order. 	See generally Findings of Fact and
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Conclusions 	of 	Law 	Regarding 	Travelers 	Motions 	For 	Approval 	of 	Certain 	Settlement
Agreements and For Entry of a Clarifying Order, dated Aug. 17, 2004 (Dkt. No. 3750).
II. Procedural History
On appeal, the District Court affirmed the 2004 Clarifying Order in all material respects,
except with regard to the “gate-keeping” provision.9 In re Johns-Manville Corp. (“Manville I”),
340 B.R. 49 (S.D.N.Y. 2006). 	The District Court relied largely on the Second Circuit’s prior
decision in MacArthur Co. v. Johns-Manville Corp., 837 F.2d 89 (2d Cir. 1988) to reject the
various challenges brought by the Objecting Plaintiffs. Notably, the District Court found that the
Second Circuit had already considered and rejected an argument similar to Chubb’s due process
challenge in MacArthur when it ruled that all “interested parties were provided with notice and a
hearing before the settlements were approved by the Bankruptcy Court. The notice of proposed
settlements issued by the Bankruptcy Court met the requirements of due process.” 	Manville I,
340 B.R. at 68 (quoting MacArthur, 837 F.2d at 94).
In 2008, however, the Second Circuit reversed Manville I, holding that the District Court
lacked subject matter jurisdiction to enjoin claims against Travelers “that were predicated, as a
matter of state law, on Travelers’ own alleged misconduct and were unrelated to Manville’s
insurance policy proceeds and the res of the Manville estate.” 	In re Johns-Manville Corp.
(“Manville II”), 517 F.3d 52, 68 (2d Cir. 2008). 	Such claims, according to the Second Circuit,
could not have been barred by the 1986 Orders because the Bankruptcy Court had neither the
jurisdiction nor the authority to enter a confirmation order that extended beyond the “res” of the
debtors’ estates. Id. The Second Circuit arrived at this conclusion without reaching Chubb’s due
9 The District Court ruled that this Court lacked jurisdiction to enter a “gate-keeping” provision, which required
future asbestos-related claimants against Travelers first to establish before the Bankruptcy Court that their actions
neither arose from Travelers’ relationship with Manville nor violated the 1986 Orders. Manville I, 340 B.R. at 66-
67.
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process arguments. 	Id. at 60 n.17 (“Because we decide this case on other grounds, we do not
specifically address Chubb’s claims.”).
Less than a year later, the United States Supreme Court granted certiorari and reversed
Manville II. Bailey, 129 S. Ct. at 2198. Finding that the Second Circuit erred in revisiting this
Court’s subject matter jurisdiction of the 1986 Orders, the Supreme Court expressly held that
“the 1986 Orders became final on direct review over two decades ago” and “whether the
Bankruptcy Court had jurisdiction and authority to enter the injunction in 1986 was not properly
before the Court of Appeals in 2008 and is not properly before us.” Bailey, 129 S. Ct. at 2203.
The Supreme Court explained that the issue, instead, was whether the Bankruptcy Court had
properly interpreted the scope of the 1986 Orders in its 2004 Clarifying Order. 	Id. at 2204
(emphasis added). 	Finding that this Court had, the Supreme Court declared that “the only
question left is whether the Bankruptcy Court had subject-matter jurisdiction to enter the [2004
Clarifying Order]. The answer here is easy: as the Second Circuit recognized . . . the Bankruptcy
Court plainly had jurisdiction to interpret and enforce its own prior orders.” Id. at 2205 (citing
Local Loan Co. v. Hunt, 292 U.S. 234, 239 (1934)).
The Supreme Court in Bailey refrained from determining whether any particular party
was bound by the 1986 Orders. Id. at 2207 (“We have assumed that respondents are bound, but
the Court of Appeals did not consider this question.”). Because Chubb preserved its due process
objection on appeal but since the Second Circuit never reached it in Manville II, the Supreme
Court remanded for the Second Circuit to address whether due process “absolves” Chubb from
following the 1986 Orders, “whatever their scope.” Id.
On March 22, 2010, the Second Circuit affirmed the District Court’s March 28, 2006
order as to the Objecting Plaintiffs, but reversed it as to Chubb, finding that Chubb did not
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receive constitutionally adequate notice of the 1986 Orders, and thus “it would offend the Due
Process Clause to enforce the 1986 Orders against . . . Chubb.” 	Manville III, 600 F.3d at 147.
Again, as in Manville II, the Second Circuit declined “to determine the prospective status of [the
Settlements] or to resolve arguments relating to technical objections and [the Settlements]’
overall fairness,” and left “it to the parties, with the aid of the bankruptcy court, to determine the
status of their settlements.” Id. at 158-59 (quoting Manville II, 517 F.3d at 68 n.26).
On August 18, 2010, Travelers filed a petition for a writ of certiorari and a writ of
mandamus (collectively, the “Petitions”) before the United States Supreme Court, both of which
were recently denied on November 29, 2010. 	Travelers Indem. Co. v. Chubb Indem. Co., 562
U.S.____ (2010) (No. 10-244).
On September 2, and on September 3, 2010, the Statutory and Hawaii Direct Action
Settlement Counsel and the Common Law Settlement Counsel, respectively, filed their Motions
requesting that this Court compel Travelers to pay the settlement proceeds. 	On September 30,
2010, Travelers filed its opposition brief (“Travelers Opp. Br.”) (Dkt. No. 3936) requesting that
this Court deny the Motions on the grounds that pursuant to the terms of the Settlements,
Travelers’ payment obligations are not due. 	After accepting supplemental briefing from the
Parties, this Court conducted oral argument on October 21, 2010. 	At that hearing, Settlement
Counsel expressly asked this Court to follow the Second Circuit’s directive and aid them in
determining the status of the Settlements. 	Transcript of Oct. 21, 2010 Hearing at p. 40: 17-21
(Dkt. No. 3953).
DISCUSSION
The instant Motions before this Court request the enforcement of Settlements that were
approved by this Court in the 2004 Clarifying Order. 	As a threshold matter, this Court has
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jurisdiction to enforce these Settlements pursuant to 28 U.S.C. §§ 1334, 157, 11 U.S.C. §§ 105,
1141 and/or 11 U.S.C. § 1142, as well as pursuant to the terms of the Settlements, which each
provide that “[t]he United States Bankruptcy Court for the Southern District of New York shall
have continuing and exclusive jurisdiction over this Settlement Agreement and the Parties in
respect of their relations hereunder.” 	Bronson Decl., Ex. 1, ¶ 18; Ex. 2, ¶ 17; Ex. 3, ¶ 18.
Additionally, in light of the Supreme Court’s ruling in Bailey that this Court had subject matter
jurisdiction to enter the 2004 Clarifying Order, expressly providing in paragraph 10 that “this
Court retains jurisdiction to enforce this Order and to determine any and all disputes arising
under this Order,” this Court finds that it has ample jurisdiction and authority not only to aid the
Parties in determining the status of the Settlements, but also to determine what is required by law
and equity to make the Parties whole.
To do so, this Court must first identify that which is preventing the Parties from
determining the status of the Settlements on their own. 	The Parties do not dispute that the
[Settlements] “were the product of good-faith, arms-length negotiations, are complete, clear and
unambiguous on their face and must be enforced according to the plain meaning of their terms.”
Travelers Opp. Br. at p. 1; see Statutory/Hawaii Motion at p. 14; Common Law Reply Br. (Dkt.
No. 3944) at pp. 1-2. 	They do, however, dispute whether, pursuant to the terms of the
Settlement, Travelers’ payment obligations were irreversibly triggered by the Supreme Court’s
decision in Bailey or terminated by the Second Circuit in Manville III.
At the heart of their dispute is whether the Disputed Condition Precedent has been
satisfied, namely whether the 2004 Clarifying Order clarifies that the Direct Action claims were,
and always have been, barred by this Court’s 1986 Orders, and that the 2004 Clarifying Order
became a “Final Order.” According to Settlement Counsel, the 2004 Clarifying Order, affirmed
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by the Supreme Court in Bailey, completely satisfies the Disputed Condition Precedent.
Travelers, however, argues that the Second Circuit’s ruling in Manville III that the 1986 Orders
are “jurisdictionally void” as to Chubb is a “material failure” of the Disputed Condition
Precedent, and consequently releases Travelers from its payment obligations. Travelers Opp. Br.
at p. 2.10
All of the Parties agree that the terms of the Settlements clearly resolve this dispute, and
request that this Court follow the general principles of contract interpretation11 that hold that
“where the intention of the parties is clearly and unambiguously set forth, effect must be given to
the intent as indicated by the language used.” Statutory/Hawaii Motion at p. 14 (quoting Wind v.
Eli Lilly & Co., 210 A.D.2d 220, 220-21 (N.Y. App. Div. 1994); see Travelers Opp. Br. at p. 11
(quoting Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170-71 (N.Y. 2002) (“The
fundamental, neutral precept of contract interpretation is that agreements are construed in accord
with the parties’ intent.”). 	This Court concurs with the Parties, and will enforce these
Settlements according to their plain meaning.
The Disputed Condition Precedent Has Been Satisfied Such that Travelers is Obligated to
Fulfill Its Payment Obligations Under the Settlement Agreements
To determine whether the Disputed Condition Precedent has been satisfied, this Court
begins its inquiry with the plain language of the Disputed Condition Precedent. Under both the
Statutory Direct Action Settlement and the Hawaii Direct Action Settlement, the Disputed
Condition Precedent is: “Entry of . . . a Clarifying Order containing prohibitions against Claims
at least as broad as those contained in Exhibit A, which order[] shall have become a Final
10 Travelers also argues that the 2004 Clarifying Order is not yet a “Final Order” because the Petitions filed by
Travelers are currently pending before the Supreme Court. Travelers Opp. Br. at p. 16. Yet, as the Supreme Court
recently denied both of Travelers’ Petitions, this argument is now moot. See Travelers Indem. Co. v. Chubb Indem.
Co., 562 U.S.____ (2010) (No. 10-244).
11 The Settlements provide that they “shall be governed by and construed in accordance with the laws of the State of
New York.” Bronson Decl., Ex 1, ¶ 18; Ex. 2, ¶ 17; Ex. 3, ¶ 18.
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Order(s).” Bronson Decl., Ex. 1, ¶ 2(a); Ex. 2, ¶ 2(b) (emphasis added). The Disputed Condition
Precedent is defined in substantially the same way under the Common Law Direct Action
Settlement as: “Entry of an order or orders of the Bankruptcy Court, issued pursuant to the [1986
Orders], and/or Sections 105(a), 524(g), 1141 and 1142 of the Bankruptcy Code and the Court’s
inherent powers, substantially in the form attached hereto as Exhibit A . . . which order shall
have become a Final Order.”12 Bronson Decl., Ex. 3, ¶ 2(a) (emphasis added).
12 The exact injunctive language contained in Exhibit A to the Hawaii and Statutory Direct Action Settlements
states:
The commencement or prosecution of all claims, demands, actions or proceedings against
Travelers of any kind or nature whatsoever under the statutes, laws or regulations of [11
specified states] or arising from or relating to any acts or omissions of Travelers in (a) the
handling, defense, trial, appeal or settlement or participation in the handling, defense,
trial, appeal or settlement of any asbestos-related bodily injury claim, (b) disclosing,
failing to disclose, suppressing, misleading, conspiring with any entity to disclose or fail
to disclose, suppress or mislead or acting in concert with any entity to disclose or fail to
disclose or suppress or mislead any facts, information, knowledge or beliefs about
asbestos or its hazardous properties in connection with the handling, defense, settlement
or trial or participation in the handling, defense, settlement or trial of any asbestos-related
bodily injury claim, or (c) asbestos-related claims that allege unfair competition, unfair or
deceptive claims handling or trade practices, lack of good faith and fair dealing,
statutory-based claims for “bad faith”, actual or constructive fraud, actual or constructive
breach of fiduciary duty involving, in any way, asbestos; and any claims for contribution
or indemnity relating in any way to the foregoing (a) through (c), are covered by the
Confirmation Order and permanently enjoined as against Travelers, which were released
therefrom under the Confirmation Order.
Bronson Decl., Ex. 1, Ex. A, at ¶ 3.
Varying only slightly, the exact injunctive language contained in Exhibit A to the Common Law Direct Action
Settlement states:
The commencement or prosecution of all actions and proceedings against
Travelers that directly or indirectly are based upon, arise out of or relate to
Travelers insurance relationship with Manville or Travelers knowledge or
alleged knowledge concerning the hazards of asbestos, including but not limited
to, any and all claims or demands relating to asbestos that now or in the future
allege unfair competition, unfair or deceptive claims handling or trade practices,
bad faith, failure to warn, breach of any duty to disclose information, negligent
undertaking, negligent or intentional misrepresentation, negligent inspection or
any theory or cause of action similar to the foregoing, under any statute or
common law, and any claims for contribution or indemnity relating in any way
to the foregoing, are permanently enjoined as against Travelers pursuant to the
Confirmation Order.
Bronson Decl., Ex. 3, Ex. A, ¶ 2.
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The 2004 Clarifying Order provides that for which the Parties bargained, both according
to its plain terms and its content. First, the injunctive language specified in the proposed orders
attached as Exhibit A to each of the Settlement Agreements was adopted, verbatim, in
paragraphs 6 and 7 of the 2004 Clarifying Order. 	Indeed, even Travelers admits that the 2004
Clarifying Order, at least facially, “contained the broad injunctive language contained in the
proposed orders attached to each of the Settlement Agreements.” 	Travelers Opp. Br. at p. 8.
Second, in upholding this Court’s entry of the 2004 Clarifying Order, the Supreme Court
expressly found that “[t]he Bankruptcy Court correctly understood that the Direct Actions fall
within the scope of the 1986 Orders.” 	Bailey, 129 S. Ct. at 2203. 	As little remains to be
addressed as to whether the 2004 Clarifying Order contains the requisite broad injunctive
language bargained for by the Parties in full satisfaction of the terms of the Settlements, this
appears to be the end of the inquiry.
Nevertheless, Travelers maintains that it is “absurd to argue” that the Settlements remain
intact in the wake of the Second Circuit’s Manville III decision. 	Travelers Supp. Br. (Dkt. No.
3949) at p. 4. 	Given the Second Circuit’s holding that the 2004 Clarifying Order is
“jurisdictionally 	void” 	as 	to 	Chubb, 	Travelers 	asserts 	that 	the 	2004 	Clarifying 	Order,
consequently, does not “contain[] prohibitions against claims ‘at least as broad’ as those agreed
to by the Parties as condition precedent to any payment obligation.” 	Id. 	In effect, Travelers is
arguing that because the 2004 Clarifying Order does not enjoin all parties, including those who
failed to receive sufficient notice such as Chubb, Travelers has not achieved “complete and total
peace from Direct Action Claims” and is therefore released from its payment obligations.
Travelers Opp. Br. at p. 13 (emphasis added).
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Travelers’ position cannot be squared with fundamental principles of contract law that
require this Court to adopt “a construction [of an agreement] . . . which renders the contract
valid.” Civil Serv. Employees Ass’n, Inc. v. State Univ. of Stony Brook, 368 N.Y.S.2d 927, 930
(Sup 1974). 	Travelers’ reading of the Settlements would require this Court to enter an order
clarifying that all Direct Action claims were enjoined by the 1986 Orders, regardless of whether
the parties bringing these claims received constitutionally sufficient notice of the 1986 Orders.
However, a reading of “[a]n agreement which violates a provision of the constitution is illegal
and void” and “the law will not presume that the parties intended to make an illegal contract.”
Id.; Venizelos, S.A. v. Chase Manhattan Bank, 425 F.2d 461, 465 (2d Cir. 1970) (“A construction
that will sustain an instrument will be preferred to one that will defeat it; if an agreement is fairly
capable of a construction that will make it valid and enforceable, that construction will be given
it.”) (internal citations omitted); 	Friedman v. State, 242 A.D. 314, 317 (N.Y. App. Div. 1934)
(“The law does not assume an intention to violate the law, nor will an agreement be adjudged to
be illegal, where it is capable of a construction which will uphold it, and make it valid.”); see
also Restatement (Second) of Contracts § 203(a) (1981) (“[A]n interpretation which gives a
reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which
leaves a part unreasonable, unlawful, or of no effect”). 	The only legally permissible reading,
therefore, is that the scope of the 2004 Clarifying Order is constrained by necessity to enjoin
only claims of those parties originally bound by the 1986 Orders. Accordingly, this Court finds
that Manville III does not disturb the Settlements.13
13 Moreover, it is noteworthy that with respect to contribution and indemnity claims by Chubb related to Common
Law Direct Actions, Travelers itself has admitted that the risk of such claims is highly remote. See e.g., Bronson
Decl., Ex. 7 at p. 3 (“Not one of the insurers has ever even asserted a claim for ‘contribution’ or ‘indemnity’ against
Travelers.”); Bronson Decl., Ex. 8 at p. 20 n.8 (“The hypothetical contribution or indemnity claim that Chubb
complains are being ‘confiscated’ do not presently exist and could only arise if some future Direct Action asbestos
plaintiff were able to collect from Chubb what supposedly should (were it not for the 1986 Confirmation Order) be
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Given that the 2004 Clarifying Order contains the broad injunctive language for which
the Parties bargained, the only remaining question for this Court to determine is whether the
2004 Clarifying Order is a “Final Order” as defined under the Settlement Agreements. Under the
terms of the Settlements, an order is a “Final Order” if “such order shall have been affirmed by
the highest court to which such order was appealed or certiorari has been denied and the time to
take any further appeal or petition for certiorari shall have expired.” Bronson Decl., Ex. 1, ¶ 1(j);
Ex. 2, ¶ 1(g); Ex. 3, ¶ 1(j). 	This Court finds that the 2004 Clarifying Order became a “Final
Order” after it was affirmed by the Supreme Court, the court of last resort, in Bailey on June 18,
2009.14 Indeed, the only issue that was pending before the Supreme Court, whether Chubb was
bound by the 1986 Orders on due process grounds, has no impact on whether the 2004 Clarifying
Order is a Final Order. 	Thus, the 2004 Clarifying Order is a “Final Order” and the Disputed
Condition Precedent has been completely satisfied as to all of the Parties.15
Accordingly, from a contractual standpoint, this Court concludes that Travelers received
everything that it bargained for: an order clarifying that to the extent a Direct Action claim
(including 	any 	related 	contribution 	or 	indemnity 	claim) 	was 	enjoined 	under 	the 	1986
Confirmation Order, such claim was indeed enjoined, and such order has become a Final Order.
Travelers’ notion of “complete and total peace” is a subjective concept that no tribunal can ever
guarantee. See Bailey, 129 S. Ct. at 2197 (noting that it is “black-letter law that an unambiguous
collectible from Travelers. 	Beyond the fact that the existence of such a claim is entirely hypothetical, the
Bankruptcy Court has already provided a remedy to Chubb . . . . ”) (emphasis added).
14 Travelers argues that Settlement Counsel breached the Settlement Agreements by failing to use their “best efforts”
to support Travelers’ Petitions to the Supreme Court. See Travelers Opp. Br. at pp. 26-27. Because Settlement
Counsel’s rights were fully adjudicated by the Supreme Court in Bailey, this Court finds that Travelers’ argument is
meritless.
15 Statutory and Hawaii Settlement Counsel requested that to the extent this Court determines that the conditions
precedent under the Common Law Direct Action Settlement have not been satisfied, this Court should enter a
severance order. Statutory/Hawaii Motion at p. 19. As this Court has found that the Disputed Condition Precedent
has occurred, this request is rendered moot.
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private contract’s terms must be enforced irrespective of the parties’ subjective intent”).
Therefore, the Disputed Condition Precedent has occurred, and the Settlements should be upheld
in their entirety.
Further, from an equitable standpoint, given that the 2004 Clarifying Order became a
“Final Order” after Bailey on June 18, 2009, and Travelers has yet to fulfill its payment
obligations pursuant to the Settlements, this Court is concerned that Travelers is getting
something for nothing. Indeed, this is in line with the “overriding general policy, as Mr. Justice
Holmes put it, ‘of preventing people from getting other people’s property for nothing when they
purport to be buying it.’” 	Kelly v. Kosuga, 358 U.S. 516, 520-21 (1959) (quoting Cont’l Wall
Paper Co. v. Louis Voight & Sons Co., 212 U.S. 227, 271 (1909). 	As a court of equity, this
Court may exercise its equitable powers to ensure that substantial justice is achieved. 	See
Pepper v. Litton, 308 U.S. 295, 304-05 (1939).
Here, even though Travelers received everything that it bargained for, Travelers is
threatening to upend all of the Settlements, even after they have been affirmed in their entirety
by the United States Supreme Court. 	Travelers, however, may not be released from its payment
obligations in its attempt to utilize an argument that is not only contrary to the express provisions
of the Settlement Agreements, but also contrary to constitutional due process considerations.
The fact that the Second Circuit has held that Chubb “did not receive adequate notice of the 1986
Orders” and is therefore not bound by its terms does not affect the finality of the 2004 Clarifying
Order. 	Manville III, 600 F.3d at 158. 	Therefore, just as the Supreme Court has barred parties
from bringing suit against Travelers based on the plain language of the 1986 Orders, Travelers
should likewise be bound by the plain language of the Settlements, and should be compelled to
comply with its payment obligations. 	See Strong v. Sheffield, 144 N.Y. 392, 394-96 (1895)
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(holding that one party’s forbearance from bringing suit is a sufficient consideration for the
promise of the other party). Travelers may not walk away with precisely the injunction it
bargained for without paying the asbestos victims the compensation that they are duly entitled to
pursuant to the Settlements.
Although not contemplated by the Settlements, this Court has been asked to determine
whether it will award interest to the beneficiaries of the Settlements. 	Statutory and Hawaii
Settlement Counsel maintain that “the beneficiaries of the Statutory and Hawaii Direct Action
Settlements are entitled to interest on the settlement proceeds accruing since the Supreme
Court’s June 2009 Ruling.” 	Statutory/Hawaii Motion at p. 20. 	They argue that Travelers has
failed to fulfill its payment obligations and, under relevant New York law, the beneficiaries of
the Statutory and Hawaii Direct Action Settlements are entitled to interest “upon a sum awarded
because of a breach of performance of a contract,” which shall be computed “from the earliest
ascertainable date the cause of action existed.” N.Y. C.P.L.R. § 5001(a), (b) (McKinney 2007).
Travelers counters that “no interest can possibly be due as there is not a final Clarifying Order,
no settlement payments are due, and there is no need for Travelers to take a position on the date
of an alleged breach that has not occurred.” 	Travelers Supp. Br. at p. 7 n.6. 	As the asbestos
victims have been waiting a long time to receive their compensation, while in the process
Travelers has been benefiting from the Supreme Court’s mandate barring Direct Action claims
against it, the Statutory and Hawaii Settlement Counsel’s request may be what is required to
make these victims whole. Accordingly, unless the Parties can consensually resolve the interest
issue, this Court is ordering briefing on that subject forthwith.
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CONCLUSION
For the reasons set forth above, the Motions are hereby GRANTED in their entirety. In
light of the foregoing, this Court hereby orders Travelers to immediately satisfy its payment
obligations pursuant to the Settlement Agreements, which have been due and owing since June
18, 2009. In addition, the Parties are hereby directed to submit a briefing schedule to this Court
within 21 days of issuance of this Memorandum Decision and Order regarding whether the
beneficiaries of the Settlements are entitled to interest on the settlement proceeds and, if so, the
amount due and owing. Alternatively, the Parties are granted 60 days from the issuance of this
Memorandum Decision and Order to submit a consent order resolving the interest issue, with or
without the aid of the Mediator.
IT IS SO ORDERED.
Dated: New York, New York 	/s/ Burton R. Lifland
December 16, 2010 	United States Bankruptcy Judge
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